Steve Ballmer: Sweden Cloud Keynote

STEVE BALLMER: Well, thanks. It is a real honor and privilege for me to have a chance to be here with you this morning. Hopefully we’ll have a lively session. I’m going to take the opportunity to share a few thoughts. Hopefully we can open your eyes a little bit to some new possibilities with a demonstration, and I’m really looking forward to a discussion with our panelists here today.

In keeping with the theme here of shifts and opportunities, I really want to start with just a statement of optimism about the future. The amount of innovation, the chance, the positive energy and creativity that will come out of our company and of our industry over the next five and 10 years is amazing. And we’re all privileged in some senses and lucky to have been born at a time where we can literally do so much technologically to remake the world. And it’s fun to have a chance to continue to be in the middle of all of that right now.

As many people in many quarters are talking about what’s going to happen and uncertainty in the economy, the one thing we do know for sure is that jobs will be created in the technology sector because of that innovation, and that advances in technology will help to fuel important advances in other industries, as the quality of health care and education, the speed of scientific discovery, the quality of marketing and financial services will all be built upon advances in information technology.

So, to all of you I say thank you for the business that we do together today. We’ve got a lot of great customers and partners in the audience. And to all of you I’ll also say in advance thanks for all the great business we will do as we move to the future. We have areas of strength where I’m sure we’ll continue to work together, and we’ve got areas where we’re bringing exciting new products like our new generation of Windows Phones to markets.

And I trust we will work together, but I want to say thanks to everybody very, very much; whether you are a customer or you are one of our 250,000 business partners in Europe who happen to be with us here today, I want to say thanks very much to all of you for your help and your support.

Today’s discussion will center around the so-called cloud. And we talk a lot in our business about the cloud — cloud, cloud, cloud, cloud, cloud.

What is the cloud? I gave a speech in May. We had about 100 CEOs and maybe a handful of journalists in an audience at our headquarters in Seattle. And I got up there and I did what I thought was my very best work describing the cloud, and then everybody sat very politely and quietly afterward, and finally one of the journalists raises her hand, and she said, “Steve, I understand you’ve got a lot of enthusiasm for the cloud.” “Absolutely I do,” I said, and I said, “What’s your question?” She said, “I still don’t really understand what it is.” (Laughter.)

OK, so I’m going to take a little bit of a shot at it, not so much by trying to pick any one technology and saying it’s the cloud, or any one business model and saying it’s the cloud. The cloud is kind of a term we use in our industry to describe the general remaking of the way information technology works from a world in which most computing has been done either in businesses or on PCs to a world in which computing is as likely to be done out in the Internet as it is inside a corporation’s boundaries, it’s as likely to be done on a phone or a TV-style device as it is to be done on a PC, and it is as likely to be balanced, taking advantage of the full resources and information of the world as it is only the specific knowledge that any one person or organization may have.

And that transformation is the cloud transformation, and it’s got a lot of moving technical pieces and a lot of new business model opportunities.

You know, when we talk about the cloud typically we will say to many of you as businesspeople, bring your information, your IT infrastructure, and allow us to operate it in our datacenter, or at least take the same modern technologies that we are using in our datacenters on the Internet and put it into your datacenters. So, there are new opportunities brought by the cloud.

Our historic relationship with many of your companies ended the day we gave you a DVD with our software on it. In the world of the cloud, it can become part of our 24-hour a day, seven day a week job to be running the applications and services that you use to run your business.

Of course, with that comes a new set of responsibilities. We have to run 24 hours a day, seven days a week. We have to be able to protect the privacy and security of your information. As individuals as well as businesses we have to be able to protect those perfectly.

So, the cloud, this transformation brings new opportunities and responsibilities for vendors, customers alike.

When we talk about the cloud, one of the things people like to slip to most quickly is that the cloud somehow is just about the business model change, move something from your datacenter to ours, and pay us every day by the glass, so to speak, as opposed to simply buy software.

And yet the cloud as much as anything is also about a new set of capabilities. The cloud can learn, the cloud can pick up information. It doesn’t just know about you, and it may not just even have the data about you and your business.

The cloud has access to the whole world’s information, again with appropriate protection for privacy and the like. But when you ask the cloud a question, you will expect it to answer the question, knowing everything it can about the world at large.

So, if I ask, I don’t know, show me sales of Microsoft Office, I really probably want to be able to say, show me sales by Microsoft Office by country, by GDP growth in that country.

Now, the truth of the matter is some of that information may come from the cloud, but the cloud is a learning entity; it knows, it indexes all of the world’s information. It indexes all it can about the world’s people, and it helps you find things and take action, professionally and personally, you would not otherwise take.

The cloud will also learn about you. It can learn about your preferences, what you’ve done in the past, what you’ve queried; again all with appropriate privacy connotations. But the cloud is not just a new business model, the cloud is an additional set of opportunities to write exciting software that have a learning characteristic about them.

The cloud is a place where we’ll also write programs that from the get-go think not just about individuals or even companies, but think about collections of people who want to enhance their personal and professional interactions.

We talk a lot today about social networking, but if you really sit there and study what’s going on in the world of social networks, it’s fantastic, but still way under-exploited.

The ability to use the cloud to help us connect more is very high. If I wanted to very quickly, for example, today, put up a little website for me, for perhaps some of our business partners and customers to work together on a project, to implement their cloud implementation, that is not as easy as it ought to be today. You wouldn’t go do that on Facebook; it’s not the appropriate set of tools. How would that come together?

If I wanted to quickly put together a site where all of the people involved at Microsoft in working with Ericsson, plus all of the people at Ericsson who are working with Microsoft, could come together and talk about opportunities and the like, that is still not the easiest thing in the world to do.

This meeting, I think we’re glad I’m here — I’m glad I’m here — but this meeting still is not the same if I’m not here physically. The cloud could help make this as good virtually as it is in reality. In fact, there’s a lot of things the cloud could do that are better than what we’re able to do in this room.

I can’t really see the person who’s in the sixth or seventh row in the upper deck here in the Chinese Theatre. Of course, if I had my little virtual webcam, then we could have a different kind of a meeting, but it would lose humanity today. It’s an area of investment for us.

The cloud will drive changes in the way we think about server hardware and client hardware, server software and client software.

Everything needs to evolve to assume that it’s interacting in this new model. The server platform has to be upgraded to assume that things are going to be out on the Internet, whether they’re in your datacenter or ours. The way we construct datacenters will get more efficient because things in the cloud have higher scale, they’re disaster recovery-proof from the get-go. You need to write applications that really know how to failover and use hardware more economically. So, hardware and software for the server will upgrade, and hardware and software for the client.

So, there’s a lot of fantastic innovation possibilities from the vendor community all the way through to the applications that each and every one of you are engaged in today.

One of the ways I think is perhaps best to get you to think about the changes that are happening around the cloud and particularly what’s going on in the client is the investment and innovation that our company is putting into Internet Explorer. Internet Explorer is the No. 1 browser on the planet. We’ve had a lot of competition. It’s an interesting category, Internet browsing, because in a sense it has no independent business model, and yet everybody understands it’s one of the most fundamental starting points for Internet journeys.

And so when we talk about new client hardware and software, we’re not talking about clients turning away from the Internet and from standards, we’re talking about new ways in which clients — phones, PCs, and TVs — can embrace the cloud, but bring the benefit of intelligence on the device and the advantages of intelligence in the cloud together, and that’s really what we’ve done with Internet Explorer 9.

It’s in beta, but it’s a very wide open beta. I encourage you to download Internet Explorer 9. I’ve given it the ultimate test; I put it on my wife’s PC, for which I am the help desk manager. So far I’ve gotten nothing but praises and compliments. So, I do encourage you to try it, but we thought we’d show you a little bit of what you get when you bring together the best of the smart client with the best of HTML standards, and the cloud. And to help me do that, I want to invite Michael Bohlin up on stage, who will do a bit of a demonstration. Please welcome Michael. (Applause.)

MICHAEL BOHLIN: Thank you, Steve.

So, we have over 1 billion Windows users out there today, and our goal is to give those users the best Web experience.

To do that, we need to make sure that that experience is fast, is clean, and it also embraces all the standards that are out there, and there is the whole PC to deliver that experience to the user.

Let me show you a couple of examples. Here you can see Internet Explorer 9, with my homepage, Bing. As you can see, the interface is very clean. It puts the focus onto the website.

But if you’re like me that likes to work with multiple documents at the same time, I also would like to work with multiple websites at the same time, Windows 7 has a great feature that allows you to share the screen between applications.

So, one thing that I can do is I can take my Web browser, move it over to the edge, and I will “snap” to that edge with Windows 7. And so now you can see that I have another website up here showing me some information about Windows Intune.

However, it doesn’t solve my problem. I would like to work with two different documents at the same time.

What Internet Explorer 9 allows me to do is to take that Web experience out of the browser box, drive it all over, and snap again in Windows 7. So, now I have a very easy way to work with multiple documents.

But we are coming back to the fact that we need to put back the focus on the website. And even though I like to work with tabs in the Web browser, the most common scenarios for a user is that they actually take and pin their favorite application to the taskbar. So, why don’t we do that with Internet Explorer 9. So, let’s grab my favorite website, drive it down to my taskbar, and pin in there.

So, what happened now is that I promoted my website to become a part of my desktop, and without no knowledge of the website owner, it actually embraces that website. As you clearly can see up here on the left corner, I took the website logo, I took the colors of the website, and I make it shine through my Web browser.

There is another thing that it can do for me though. If it would like to give me some extra service because I actually use this website a lot, they can use another feature in Windows 7 that we call Jump Lists. Jump Lists are a way that we can give more intelligence to the right-click of the icon on the taskbar.

First, you can see I right-click my Bing website, and they gave me direct entrance to different parts of the site, depending on what kind of information I’m looking for.

And this is something that the programs can do programmatically at any given time. It doesn’t have to be there before or it doesn’t have to be there after, but of course they give me that opportunity.

And then also as you can see with our local vendors here, they already start to spin on this and give me some different examples on how I can get the latest news, I can search for companies, see the latest images that are out there, of course, and the gossip, and also even go as far as giving me the opportunity to control my favorite Web radio like Mix Mega Poll in this case, with a start and pause button.

Lastly, it’s all about the experience. We come from text to still images, audio, and movies. It won’t stop there. The Web is becoming more and more sophisticated.

The problem is with traditional Web browsers when you really turn up the heat, you can see clearly that the browser itself is going to be the really bottleneck. And the reason for that is basically because the browser is very thin —

STEVE BALLMER: That was one of our competitors running HTML5?

MICHAEL BOHLIN: That was one of our competitors running HTML5 with the latest browser that’s out there.

STEVE BALLMER: Just thought I should check. (Laughter.)

MICHAEL BOHLIN: So, to give you a feeling of how this looks like in IE9 where we actually unleash the power of the Windows PC, we open up the other 90 percent of the capacity, you can clearly see when I move up the pressure on the website and fill it with a lot of complexity, it just still is delivering that great experience to the user.

So, having that said, if you take all this together, how we put the website back in focus, we actually deliver on, embrace all the standards that are out there, and we accelerate that by leveraging the whole PC. That is what we mean when we say we want to bring back the beauty of the Web to the user. Thank you. (Applause.)

STEVE BALLMER: There are two key principles, and they’re cloud principles that we showed you in the demo. Principle No. 1 is it’s not about separating through a layer like the browser, separating the smart client from the cloud; it’s about integrating the smart client with standards from the cloud.

So, we showed you how to use the full advantage of PC hardware to make things go fast, and it treats applications on the device and websites both as first class citizens that can be mixed and matched and run concurrently, and we think that is an important part of the way we embrace this boundary between the cloud wants smarter devices, the cloud wants devices like Windows to know about it, to love it, and to treat cloud applications and client applications similarly and both as first class citizens. And I think by building an Internet Explorer 9 experience that loves the cloud and loves the Windows PC you start to see the direction in which we’re taking that.

I also get the chance today to announce a couple of other new cloud services that we’re bringing to market, both in beta at this stage, but since I had a chance to talk to you I wanted to share them with you. One is Windows Intune. Our enterprise customers, particularly one of the key questions we get asked in terms of creating new opportunities, we get asked the question is, will there be services from the cloud that actually just help me manage the device, the PC, desktop, client as a device, will that be a service I can get from Microsoft for security, for backup, for roaming, for administration, for policy. And with this Windows Intune service we will operate for you a service that takes care of all of your Windows devices that come from the cloud. You still get to decide the key policy parameters, but then after that we will run essentially your desktop infrastructure for you.

The other product we get a chance to announce today is our Dynamics CRM beta of its next release from the cloud. We’ll be doing kind of a formal launching of this here in Europe next week, but the Dynamics CRM product has really come a long way, and today I think most customers will say it is the best way, it’s got the best, simplest user interface for customer management on the planet, it’s very well integrated with our Microsoft Office infrastructure, and people have just been waiting, when can we get that as a service coming from the cloud.

Again it builds on these principles, new opportunities, it builds on taking advantage of information that lives outside its world, it learns. We’ve designed it in such a way that customers and trading partners can participate in some of those interactions, which if you think about CRM that’s kind of what it’s all about. And, of course, it builds on client and on service richness.

It will be formally announced — both of these will be formally announced the week after next here in Europe.

These two services join a whole family of services, cloud services that we have for our business customers. We have from the one side software-as-a-service products, cloud services like Dynamics, our Office productivity suite. You’ll see us do more and more to enable it as a cloud service. We started with e-mail and collaboration and meeting and unified communications. I talked about Intune and our desktop management capabilities. And, of course, from a platform perspective, for those of you who actually want to run your own applications or other applications that have been written and instanced for your business we have our platform service, Windows Azure with its database capability SQL Azure. We now have tens of thousands of customers who are using that as infrastructure in their environment.

We’ve announced a new technology we call the Azure Appliance where we will take literally the physical shipping crates that we use that have hardware storage, networking built in, in addition to our software, we’re going to offer them to our partners and customers so that you can buy, if you will, cloud in a box. We’ve announced eBay and HP and several others, Dell, as first customers, but no matter how you want that, we’re moving the programming model forward. You take your Windows and SQL Server applications, you upgrade them slightly, and you get an application that can be managed at much lower cost, with much better disaster recovery, and much better scalability. So, all of these things from a business perspective are moving to embrace the cloud.

We’ve had good success in bringing customers with us to the cloud. Fifty percent of the Fortune 500 customers in the U.S. are now using one of the Microsoft cloud services. The bulk of those customers would be using what we call our Business Productivity Services: Exchange Online, SharePoint Online, Office Online. But we have over 10,000 paying customers for the platform, Windows and SQL Azure.

We have a lot of great brands, great companies names from around the world. You see some of those here on the slide: Starbucks, Pitney Bowes, 3M, GlaxoSmithKline are all customers who have moved with us to the cloud.

The Nobia group, who build a number of kitchen brands, have moved with us using Microsoft Business Productivity Services, particularly online meeting and unified communications.

With Siemens we’ve done a lot of work to build device management platforms on our Windows Azure platform in the cloud.

So, there’s a lot of action. This cloud phenomenon is no longer something that is out there in the future. It doesn’t mean that I’m going to tell you that every application that every one of you run will be in the cloud tomorrow morning. I’m not going to be quite that crazy — although I’m tempted to be, I’m not going to be quite that crazy.

But I am going to tell you you’re not longer amongst the leading edge if you’re moving forward to embrace cloud services. This is a phenomenon for the here and now. And lest you have any doubt about that at all, we thought we’d get a few customers up here from Sweden, and have a chance to have a little bit of a dialogue.

So, please join me in welcoming Rich Strader, the CIO of Volvo; David Holocek, the director of Volvo involved in interactive marketing; and Eva-Karin Dahl, the COO of Elite Hotels. Welcome them onstage, please. (Applause.)

(Laughter.) Somebody rehearsed the protocol with you guys and not with me; my screw-up.

All of these folks have had some real experience doing work in the cloud and thinking through those scenarios, and I thought what we’d do is I’ll throw some questions out, and then you guys can go wherever you want in terms of commentary. We’ll see where we go.

But we’ll start with Rich Strader. Volvo has been a user of some cloud services, and, Rich, maybe I’ll just ask you to fill people in what kind of benefits do you see short and long term in the cloud.

RICH STRADER: OK. Well, first I think the thing is we’re going to be moving — we’re in the process of moving away from the previous owner, which is Ford, into a new ownership relationship, and we have to replace all of our collaboration tools. So, we’re going to go to a Microsoft service using BPOS offering.

And I think the benefit we see — that’s just one example of where we think we’ll go — but I think the benefit you see in the cloud is we’re really a car company, so we’re different than Microsoft in that we don’t have software as our primary business. Our primary business is building premium vehicles, and selling them and marketing them. So, we want to focus our attention on that, right?

So, for us we think the cloud offers a way to get services that are very attractive to us that we would otherwise have to build ourselves. And by not building them ourselves, we can take the IT resources we have and put them on things that are differentiators for the Volvo car company. So, that’s a good one.

Another one is that it’s instantly global, right? So, any of our offices anywhere in the world and any of our expansion can immediately take advantage of the cloud. They don’t have to wait for us to build infrastructure or to pipe it into a local area, we can just start using it.

And I think as you mentioned before, the idea that it’s going to continue to be improved over time, right, we’re going to see more and more coming our way, and we can just take advantage of that.

RICH STRADER: Well, I mean, we shopped around and looked at who had other offerings, right, and really felt that you are the true leader in the industry when it comes to collaboration tools. And the service seemed to have everything, as you mentioned. We now will get redundancy built in, we don’t have to do that ourselves. We can rely on you and your folks to do that. We feel really comfortable with — you know, we have — sorry. We feel very comfortable that you have capabilities in your organization to do that.

The other thing is that when we looked at what it would take to go from where we are to where we’re going to be, you had a clear path for migration. So, you actually have done this many other times, and just sort of move us down that path and make sure we don’t make a difficult mistake.

And you mentioned before, I mean, the good news is you’re with us to help provide us support, and that’s really good because, I mean, you worried when you put it on your wife’s PC, I have to worry when we put it on our CEO’s PC. (Laughter.)

STEVE BALLMER: Yes, sir! And you see a lot more in the cloud in your future?

RICH STRADER: Yeah, I think, as I mentioned, we see it’s going to continually evolve, and we see more services that we’re likely to use coming about, right? We’re just starting right now with collaboration, but we certainly see many of the other Business Productivity offerings there.

And as you mentioned, over time, there is likely to be more specific applications in the automotive space we could take advantage of. So, we do believe that that will be the right thing to do for us as well.

STEVE BALLMER: Great. Great.

David, let’s talk a little bit about what you’ve done on the customer-facing side at Volvo.

DAVID HOLOCEK: Let’s do that, but let’s start with a small little video. So, please, on screen.

(Video segment.)

(Applause.)

DAVID HOLOCEK: Thank you.

STEVE BALLMER: Nice job. Doing a global digital launch of a new car, tell us a little bit about that, why, how did it work for you.

DAVID HOLOCEK: Well, Steve, you may have heard about the small little movie series called the Twilight Saga. At least I’m sure your kids have. So, I mean, we were fortunate enough to be featured in the original books, and so therefore it was quite natural for us, and we were very happy to participate in the movies as well.

So, we used the latest installment of the series, the Eclipse movie, to continue the launch of our highly successful Volvo XC60.

We did this by creating a rich and immersive game experience where people could sort of search through a virtual representation of the Twilight world, looking for the quickest way to the safe harbor of the hero’s house, still sort of avoiding all the dangers lurking in the forest and so on.

So, very global, very sort of rich and immersive. We launched this globally during the premier of the Eclipse movie.

STEVE BALLMER: And did you get the kind of lift you had hoped on launch? It seems very exciting.

DAVID HOLOCEK: Definitely. I mean, we got a huge amount of people playing it. We had almost 400,000 people within a very short time period. We were extremely happy with that.

STEVE BALLMER: So, how did you go from having no application to having an application that had to go from let me say non-car talk, zero to 400,000 users overnight?

DAVID HOLOCEK: Well, that was a challenge. I mean, based on the previous experience we’ve had with the earlier Twilight movies, we knew that we would get a lot of attention, and a huge amount of people visiting.

So, while we are running on one of the most flexible and scalable Web platforms out there, Microsoft’s SharePoint Server, we knew that our infrastructure just wouldn’t be able to cope with all those developments that we wanted to have in the game.

We also had the previous experience working with major U.S. studios like Disney. So, we knew that the game mechanism actually could change at the very last minute, which they did.

All in all we needed a fully flexible, highly scalable, and absolutely secure platform for our game data. We were giving away a brand new car as a grand prize, so it had to be secure.

So, I mean, we were sort of painfully realizing that there’s no way that we can pull this off on our own. Having a long and strong relationship with Microsoft, we turned to you guys and asked for help, and you basically showed us the way to your magical box of tricks that you call Windows Azure.

I mean, one million visits later, with almost 400,000 people playing the game with a very short timeframe, we can look back at a perfectly smooth running campaign, and look forward to many future online activities on the Azure platform.

STEVE BALLMER: Did that cause any stress and strain between marketing and IT or were you able to manage that? (Laughter.) He says not sure I should have just asked, but did that work out?

RICH STRADER: No, I think it’s very important to recognize when we’re talking about that our role in the IT organization here is to offer support for our business teams. So, we have an expression that there is no such thing as an IT project, there are only business projects that require a lot of IT help.

But it’s really important that that’s our priority, and I think Dave has made the right choice. There wouldn’t have been a lot of value for us with our company standing up that sort of capability, right? You have to just go ahead and get it and immediately be effective, and support the business and getting out there in front of the people, and watching this new vehicle that hopefully people are excited to see. We think it’s all of the new products are outstanding, and we want people to be able to experience them immediately, and not wait on the slow IT organization.

STEVE BALLMER: Great.

RICH STRADER: So, I think we very much think it’s the right thing to do.

STEVE BALLMER: Super.

Eva-Karin, what’s a hotel chain doing with the cloud?

EVA-KARIN DAHL: No, I used to wonder, really.

Our business is about delivering the customer experience, and delivering a good customer experience. So, the business needs access to the relevant technologies that does not require a lot of time and effort from the staff. At the same time, we needed to quickly expand the business. We’re adding hotels at least every year. We’re also developing our products. So, we needed flexibility, flexibility in the sense that is absolutely scalable and that can add functionality as we need it.

So, when we were going to change our whole IT infrastructure from A to Z, it was my decision to get the help that we need. I felt it presented our best possibility.

STEVE BALLMER: Great. And what kinds of gains have you seen as you’ve started down that path for Elite?

EVA-KARIN DAHL: Well, one obvious gain is that in this expanding business we’ve been able to keep a very tight grip on our staff, on the number of staff. They’re able to deliver service. And since the solutions are cost efficient, it’s really improving itself all the way along.

STEVE BALLMER: And do you see a role for additional cloud services, Intune, I don’t know, in your organization? It sounds like you’re happy with the first steps, and might take some more?

EVA-KARIN DAHL: Well, definitely. The thing is we have to implement what we’ve put on the table right now. We’ll be finished doing that by December, and then the next step is we need to monitor what you offer, together with our partners, and see if there is a fit, and we’ll go for it.

STEVE BALLMER: Super.

I think all of you should get something of a sense, you know, these are leading edge companies, Volvo and Elite, but they’re embracing so far it looks like successfully the cloud and certainly I hope from some of their comments and thoughts you get a little bit of a sense and it makes you feel a little bit more comfortable that we’re beyond the bleeding edge and we’re just on the leading edge.

Thanks to all three of our panelists very much. (Applause.)

You know, this is a great time. I’m not sure right now you’ll be any better able to answer the question “what is the cloud” than when you walked in here, but the cloud is a new set of opportunities, it’s a new set of applications, it’s a new application development model, it’s a new application deployment model, it’s an opportunity to do more and more exciting and more interesting things with less, it’s a chance to equip people who wouldn’t have access to IT services to have access to IT services. It’s a chance to reach customers and partners, as well as employees.

And I think if you take it as a whole and you say, is the platform that all of us as participants in the IT industry, is the platform expanding in important ways, the answer is yes, whether it’s the work companies like us are doing every day, oh, we’ve got to move Windows and the PC along; ooh, there’s a new form factor, got to go attack that, what does it mean to have smaller and larger and wall-sized screens and slates and phones. All of these things fit now in a context brought to us by the cloud in which we get to think about the world in a different place. We don’t just see the world, we learn about the world. We contribute back in our understanding of the world by the pictures we take, the applications that we build, et cetera.

It is a pretty exciting time, as long as we make these infrastructural advances. If we continue to build the IT industry locked inside of corporate datacenters, and locked inside of individual PCs and other devices, the world is not going to move as fast. On the other hand, if we don’t do the appropriate job respecting security and privacy, we run into a new set of obstacles. But now is the time to embrace that change and to benefit from that change.

You know, our company, we’ve built these incredible datacenters so that we can run our cloud services. Just this last year we completed a new $500 million datacenter complex in Dublin, from which we will provide high quality support to our customers throughout Western Europe. But it’s a big investment, there’s big things happening, and it creates new opportunities for all of us.

I encourage you to jump in. The water is warm, as you heard from Elite and Volvo. They didn’t tell you about when the water gets too hot, but, you know, we’re still at the beginning of this sequence. But certainly whether it’s with what we’re doing around Windows and Internet Explorer, our new line of phones, Office and our Business Productivity Services, or Windows Azure and SQL Azure, our cloud platform services, we see a lot of opportunities to serve you. We really want to do our best, and we’d love you to jump in and start a pilot.

My e-mail address, if I can be helpful, is SteveB@microsoft.com. Feel free to ping me. But on top of that, the many, many people working for Microsoft here in Sweden would love also to have an opportunity to serve.

Thanks again, thanks for your time today, and thanks again for all your business; we appreciate it. (Applause.)

MODERATOR: OK, Steve, those were exciting customers, but they were fairly large in a Swedish sense. Do you see that the cloud services might be the thing that makes companies like Microsoft go out after the small business as well?

STEVE BALLMER: Well, Microsoft’s after the small business. The question is, what’s the best way not just for our company but anybody in the information technology to serve the small business.

My characterization of most smaller sized companies is that in a sense they’re very talented, they have very talented people in IT, but they have very small IT staffs. The typical small or medium business might have two to five to 15 people maximum in IT; much different than a say Volvo or a GlaxoSmithKline.

And particularly as the size of the IT organization is smaller, the ability to deal with many, a wide diversity of things is lower, which makes the cloud almost a better opportunity then for the small company than it is for the large company.

The problem is the small company tends to get a little overwhelmed in what’s going on today, and really has to be even more deliberate about taking a step back and saying the best way to get new IT capacity in our little company will be first to move some things to the cloud. But I think it will be the most powerful thing in taking the next step in allowing small companies to be as productive in their use of IT as the larger companies.

MODERATOR: OK, we’re talking about the cloud here today, but, I mean, technology shifts, they are often, in all fairness, identified after they’ve become a fact. So, why do you know that this is actually the shift, as they say?

STEVE BALLMER: Well, let me — nothing could be more obvious. (Laughter.) Maybe it is after the fact and in many cases the devil is in the details, but if you say to somebody, look, there’s two ways to do things, one that is locked up and sort of isolated where you don’t benefit at all from the work of others on an ongoing and regular basis, and where every company on the planet has to essentially redo the same things, and there’s another way of doing things that get better every day, that benefit by the full value of the world’s experience, where you can implement and operate things once on a global scale, if you said that about anything on the planet, I think it would be obvious that No. 2 should beat No. 1. It’s only a question of when. The question is when do you get over the obstacles, how compatible is the cloud approach, how easy is it to bring along the old applications, how well does the privacy and security work. I don’t think there’s anything other than — I mean, I have 100 percent certainty on the issue, and yet I think reasonable people can debate when the timeframes might be right.

MODERATOR: So, it’s only a question of when.

STEVE BALLMER: Yeah, that’s right.

MODERATOR: Right. A fairly obvious question that a moderator must ask is that the audience here must wonder the cloud model must be affecting your traditional business model, the licensing model.

STEVE BALLMER: Yeah, it’s should be good — (laughter) — if we do it right, and if we do it badly it won’t be good. (Laughter.)

No, it sounds silly; it’s just different. You tell me in the old days, that is in the non-cloud world, we get a chance to build brilliant software and then we hand it over the wall, and whatever our customers choose to pay us we receive. Now we get to build the same brilliant software, we have the opportunity perhaps to update it and change it more frequently, we have the chance to provide the value not just in the software, but we get a chance to run it and operate it and keep it up and save you money in labor costs, in capital costs, and equipment costs. So, we get a chance to do everything we used to do, plus a whole bunch of things that we never did, plus save you more money.

I scratch my head and say, let’s not fumble that opportunity. (Laughter.) Someplace there’s probably a chance for us to profit, and for our customers to net save money. And so I actually see it as a growth opportunity.

Of course, we have a new round of competition, and the No. 1 thing that will affect always how much money you make at something is how good you are at it and how good you are relative to competition.

In the world of software and software licensing we’ve had to compete with stuff that was, quote, “free,” unquote, and, hey, we made good money competing against free, with more value. In this world we get even more opportunity to add value, and I’m excited about that, and I think our first customers are also excited about that.

MODERATOR: OK, thank you, Steve.

STEVE BALLMER: Thank you.

ANNOUNCER: Thank you very much for coming here today. Mr. Steve Ballmer, ladies and gentlemen.